Question
The following table shows the prices of a sample of U.S. Treasury strips in February 2012. Each strip makes a single payment of $1,000 at
The following table shows the prices of a sample of U.S. Treasury strips in February 2012. Each strip makes a single payment of $1,000 at maturity.
a. Calculate the annually compounded, spot interest rate for each year.
b. Is the term structure upward- or downward-sloping or flat?
c. Would you expect the yield on a coupon bond maturing in February 2017 to be higher or lower than the yield on the 2014 strip?
Maturity February 2014 February 2015 February 2016 February 2017 Price (%) 99.523% 98.937 97.904 96.034
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The price of each strip that matures in different year is different They make single payment only ie ...
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Principles of Corporate Finance
Authors: Richard A. Brealey, Stewart C. Myers, Franklin Allen
10th Edition
9780073530734, 77404890, 73530735, 978-0077404895
